MILAN BlackRock Inc (BLK.N), the world's biggest money manager, has become the second-largest shareholder in Telecom Italia (TLIT.MI), giving it a potentially pivotal role in a shareholder vote on whether to oust the board of the Italian telecoms firm.
At the end of November, it increased its combined holding in the Italian company to 10.1 percent from the 5.1 percent it owned in October, according to documents published by the U.S. Securities and Exchange Commission.
In October BlackRock had said a "very attractive valuation" was behind its decision to invest in the Italian phone company.
The increase could potentially tip the balance at the shareholder meeting, scheduled for December 20, over the future of the phone company's board, which is in question because of complaints of conflicts of interest and the possible sale of a Brazilian unit.
However, it is not clear how many shares the U.S. investor will represent at the meeting since its stake in Telecom Italia is split among several funds.
Miguel Carrasco, managing director at proxy solicitation company Proxy Census, said BlackRock would be unlikely to bring more than 60 percent of its stake to the shareholder meeting because of the different investment strategies of its funds.
A source said Italy's market watchdog Consob was not informed by BlackRock about its recent investment.
Consob has asked the U.S. group to tell the market what its current stake in the telecoms firm is and whether it intends to be present at the shareholders meeting, the source said, adding the watchdog could rule for a sterilisation of voting rights on the stake not declared.
BlackRock is required to answer before the stock trading resumes on Monday, the source said.
A BlackRock spokesman based in London declined to comment on the developments.
The board of Telecom Italia is currently controlled by Telco, an investment vehicle owned by Spain's Telefonica (TEF.MC) together with Italian investors Generali (GASI.MI), Mediobanca (MDBI.MI) and Intesa Sanpaolo (ISP.MI).
Businessman Marco Fossati, an influential investor with a 5 percent stake in Telecom Italia, and small shareholders group ASATI are seeking the dismissal of the board, saying it favors the interests of core shareholders such as Telefonica.
The Spanish group owns the majority of Telco, which controls Telecom Italia with a 22.4 percent stake, and has signed a deal to gradually take over the holding company.
BlackRock's move and the unexpected resignations of the representatives from Telefonica on the Telecom Italia board late on Friday are increasing the uncertainty over the outcome of the shareholder meeting.
Telco is expected to hold a gathering on Thursday to prepare its strategy ahead of the event.
The raising of BlackRock's stake in the Italian phone company could be a game changer not only for the shareholder meeting, but also for Telecom Italia's strategy regarding its Brazilian mobile unit TIM Participacoes (TIMP3.SA).
Brazilian regulator Cade has said it should be sold to solve antitrust issues.
Rebel investor Marco Fossati said last week he was opposed to selling the unit as it would damage Telecom Italia business, while the company's Chief Executive Marco Patuano said last month TIM was a core asset and he would consider selling it only at a "convincing" price.
A source who had spoken with investors at the financial firm said: "BlackRock favors the sale of TIM on the grounds that it would create value for shareholders."
(Additional reporting by Leila Abboud, Stephen Jewkes, Julien Toyer and Christopher Vellacott; Editing by Alison Williams and Lisa Jucca)